COMMISSIONER OF INCOME TAX vs. SANATAN SEVA MANDAL

1 In all the three appeals, the appellant has raised the following common question, proposing it to be a substantial question of law. “Whether the Appellate Tribunal is right in law and on facts in deleting the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act amounting to Rs. 9,65,240/-?”.

We heard learned advocate Mr. Pranav G. Desai for the appellant.

The relevant facts involved are that the assessee is a Trust and registered under Sec. 12AA of the Income Tax Act, 1961 [hereinafter referred to as 'the Act' for sake of brevity]. In a search under section 132 of the Act, carried out at its office premises on 23/24.06.1994, it was revealed that several bank accounts, FDRs, IVPs etc. were maintained by the appellant and one Swami Keshvanand. The assessment under sec. 143(3) read with sec. 147 of the Act was completed and the additions were made on account of FDRs & bank accounts etc.

1 The above income was added in the hands of Swami Keshavanand on substantive basis, whereas against the respondent assessee, the addition was made on the protective basis. Against that the respondent as well as Swami Keshavanand preferred appeals before the Commissioner of Income Tax (A). Both the appeals came to be dismissed on the ground of delay in filing the appeals which was not condoned without considering the merits.

2 The penalty proceedings, however, were continued and the penalty, as mentioned below, was imposed for the three assessment years. A.Y. 1992-1993 Rs. 9,65,240/- A.Y. 1993-1994 Rs. 1,54,600/- A.Y. 1994-1995 Rs. 24,55,390/-

3 The aggrieved assessee preferred three different appeal befores the appellate Commissioner against the orders of penalty, who by his common order dated 30.01.2009 allowed the appeal observing as under : “......the AO has held that investment in FD/bank accounts etc. is assessed on protective basis in the hands of the appellant and interest on these investments is also assessed on protective basis in the hands of the appellant. In para-7 of the order in all the above assessment years, the AO has also recorded that the demand on addition of Rs. 19,43,000/-, Rs. 4,38,000/- and Rs. 57,90,974 in the above assessment years respectively will remain protective and recovery may not be enforced till the decision in the case of Swami Keshavanandji is arrived at. Thus, the penalty has been levied in the case of appellant on the assessments made on protective basis and demand, which too is protective and not enforceable. Since the assessments made on substantive basis have already been upheld by the ITAT in the case of Swami Keshavanand, the assessments made on protective basis in the case of Sanatan Seva Mandal no longer survive, hence penalty can not be levied in the hands of the appellant, on the income assessed on protective basis, when the same income assessed on substantive basis has become final upto the stage of the ITAT.”

3 Against the aforesaid order of CIT(A), the department went in appeal before the Income Tax Appellate Tribunal. That appeal came to be dismissed as per the impugned common order. The Tribunal recorded the following findings : “.......The substantive additions are in the hands of Swami Keshavanand. In that case also penalty u/s 271(1)(c) of the Act has been levied for assessment years, 1992-1993, 1993-1994, 1994- 1995, 1996-1997, 1997-1998 and 1998-1999 and the ITAT vide ITA No. 140 to 145/Rjt/2009 order of even dated the penalty has been confirmed. In assessment year 1992-1993 the assessing officer has TAXAP/858/2011 4/4 JUDGMENT also levied penalty for Rs. 32,274 which is surplus of income over expenditure. The assessing officer included that amount in total income on the ground that the assesssee did not make provision for accumulation of income u/s 11(2) of the Act. We find that in the case under consideration, the assessing officer has levied penalty on protective additions. Such penalty is not sustainable in law particularly under the circumstances the penalty has been confirmed in case where substantial additions were made......”

The findings of the Tribunal that since the substantive additions were already subjected to penalty, which was confirmed,, no penalty can be levied in respect of very additions protectively made against the respondent-assessee, is proper. It cannot be gainsaid that when the additions were made by the Assessing Officer only on protective basis, the ingredient necessary for imposition of penalty under section 271 (1)(c) of the Act, namely, that there was a willful concealment of income, was absent. In respect of an addition made on protective basis, a mens rea cannot be attributed to the assessee.

In the light of the above, the order of the Tribunal does not suffer from any error. We are in complete agreement with findings recorded by it. No substantial question of law arises for consideration. Accordingly, the appeal is dismissed.

Copy of this order be kept in each Tax Appeals. [V.M.SAHAI, J.] [N.V.ANJARIA, J.] cmjoshi